Mathematics
posted by Gibbons .
Project A requires an initial outlay of $6,000,000 but will return $4,000,000 at the end of each year 1, 2, 3 and 4 whereas project B requires an initial outlay of $2,400,000 but will return $3,500,000 at the end of years 1, 2, 3 and 4.
(i) calculate the NPV of each project if the discount rate is 5% compounded annually. On the basis of this, which project would you invest in?
(ii) estimate the IRR for each of these projects. On the basis of the IRR which project would you prefer?
Respond to this Question
Similar Questions

principles of finances
according to my interpretation of the question in October they would collect: the 10% of the August sales = .10($10,000) the 20% of the Sept sales = .20($20,000) and the 70% of the Oct sales = .70($30,000) Do the arithmetic and add … 
Finance
Aunt Sally's Food Inc. is considering expansion. Sally has paid $100,000 for a marketing study to assist in the potential valuation. The study indicates that the new product will have sales of $1,500,000 per year each year for the … 
College Finance
Aunt Sally's Food Inc. is considering expansion. Sally has paid $100,000 for a marketing study to assist in the potential valuation. The study indicates that the new product will have sales of $1,500,000 per year each year for the … 
Finance
(Inflation) A project’s initial investment is $40,000, and it has a fiveyear life. At the end of the fifth year, the equipment is expected to be sold for $12,000, at which time its net book value will be $5,000. The CFATs (including … 
healthcare fiancare
HINT: 6% X $1,000,000 – {20% X ($1,000,000 – (6% X $1,000,000))} = 6% X $1,000,000 – {20% X ($1,000,000  $60,000))}= 6% X $1,000,000  {20% X $940,000}= 6% X $1,000,000  $188,000 = $60,000  $ 188,000= $128,000 A) The interst … 
Finance
10. A new factory at Arcata requires an initial outlay of $3.5 million to be paid immediately. The factory will last for eight additional years, after which it can be sold for a salvage value of $2,000,000. Sales will be $800,000 during … 
Finance
Capital Budgeting Problems I. Indigo Industrial, Inc. is trying to determine which, if any, of five different projects it should undertake. Indigo Industrial has a 8.25% required rate of return on projects that it undertakes. The projected … 
Math
Indigo Industrial, Inc. is trying to determine which, if any, of five different projects it should undertake. Indigo Industrial has a 8.25% required rate of return on projects that it undertakes. The projected cash flows for each of … 
accounting
. Preference Decisions: NPV vs. IRR vs. Profitability Index Stephens Industries is contemplating four projects: Project P, Project Q, Project R, and Project S. The capital costs and estimated after tax net cash flows of each project … 
college finance
You are considering two independent projects that have differing requirements. Project A has a required return of 12 percent compared to Project B’s required return of 13.5 percent. Project A costs $75,000 and has cash flows of $21,000, …